Question

Dollar-Value LIFO Retail

Johnson Corporation had beginning inventory of $20,000 at cost and $35,000 at retail. During the year, it made net purchases of $180,000 at cost and $322,000 at retail. Johnson made sales of $300,000. Assuming a price index of 100 at the beginning of the year and 110 at the end of the year, compute Johnson's ending inventory at cost using the dollar-value LIFO retail method.
Round cost index computations to four decimal places, other intermediate calculations to two decimal places and the final answer to the nearest whole dollar.
$_______

Answer 1

The Johnson Corporation's ending inventory at cost using the dollar-value LIFO retail method is $23,979.09

Step-by-step explanation:

To calculate Johnson Corporation's ending inventory at cost using the dollar-value LIFO retail method, we need to first calculate the cost index and the retail index for the beginning and ending years.

The cost index can be found by dividing the total cost amount by the price index.

In this case, the beginning cost index is $20,000 / 100 = $200 and the ending cost index is $180,000 / 110 = $1,636.36.

The retail index can be found by dividing the total retail amount by the price index.

In this case, the beginning retail index is $35,000 / 100 = $350 and the ending retail index is $322,000 / 110 = $2,927.27.

Now, we can calculate the ending inventory at cost using the dollar-value LIFO retail method.

This is done by multiplying the ending retail index by the ratio of ending cost index to beginning cost index:

= $2,927.27 * ($1,636.36 / $200)

= $23,979.09